How Trade Credit Insurance Works

Trade Credit Insurance, often referred to as Accounts Receivable Insurance or Nonpayment Insurance, is slightly different from other forms of insurance in that there are likely many changes that will occur during the policy period.  We thought it might be helpful to walk through policy timeline from application to implementation, policy management including claim filing and then the renewal process.      

Application Process

The first step in the process is completing and submitting an application for quotes. 

The insured has two options:

1. Work with multiple insurance agents, complete multiple applications, answer many of the same questions multiple times. Examples of these companies would be Allianz Trade, Atradius or Coface. 
2. Our recommendation, at no additional cost: Work with an experienced trade credit insurance broker. One point of contact, one application, access to all insurance underwriters.   

Because of the time consuming nature of the application process, many applicants obtain only one quote.  With no other quotes to compare to its difficult to determine how good the underwriting results are and how competitive the quote details are.  Insurance is competitive.  The insured is often surprised in the variation of terms and underwriting results from carrier to carrier. 

Buyer Credit Limit Approvals

Approved buyer credit limits are critical.  Financial and credit information drive the underwriting process.  Buyer limit capacity and reinsurance limitations also influence whether coverage is available.   This is the value of going to many markets when deciding to move forward with credit insurance.  One market may fully approve the credit limit request, while another will only partially approve or even decline often due to lack of updated information. In many cases, the quote with the best underwriting results, especially on key or critical buyers determines which policy option is the best.  Other considerations are coverage type – cancelable vs. non-cancelable credit limits.  You should have a clear understanding of difference between the two options before moving forward.     

Policy Management

This is where the rubber meets the road.   

Review policy annually with clients to make sure they have through understanding of requirements.  Making sure we have coverage on the right debtor.  Meet past due filing requirements if necessary.  Confirm terms of sale comply with policy requirements.  Walk through claim filing window and claim settlement timeframe. 

You want to work with an experienced trade credit insurance professional who understands credit and financial statement analysis.  They are critical in advocating on your behalf with credit risk underwriter when additional coverage is needed.  We often contact the buyer directly on behalf of clients for updated financials.  This information is critical when determining whether credit is available.  We work on behalf of our clients to obtain the credit limits needed to support their sales. 

Claim Filing

Very specific timeline when to file claim.  Rule of thumb is 180 days from date of invoice.   

Review claim documentation prior to submission – 

• Purchase orders 
• Invoices 
• Aging report 
• Bills of lading including POD. 
• Any communication from debtor acknowledging the debt 

Discuss post-claim settlement collection efforts and costs for uninsured portion of debt 

Claims are paid per terms of the policy if the Insured follows policy requirements.  Occasionally the Insured misses a requirement.  The insured needs trade credit insurance professional to appeal the claim denial and advocate on their behalf.    

Renewal Process

The renewal process starts the date the policy is renewed.  If we’re able to obtain coverage needed and claims are paid timely manner the renewal is usually straightforward.  We would want to look at other markets if rates are increasing, challenges with coverage on key debtors, or Insured’s business is changing.  The process usually starts 60 – 90 days prior to renewal date.    

Conclusion

Trade credit insurance is a critical tool for protecting accounts receivable. When managed correctly, it supports sales growth and reduces risk. The key is working with a trade credit insurance professional who understands the process from start to finish. This includes the application, credit limit approvals, policy compliance, claim filing, and renewal. A well-structured policy, backed by active management and strong advocacy, helps ensure you get the coverage you need when it matters most.

Since 2004, Securitas Global Risk Solutions, LLC (“Securitas”) has helped clients develop credit and political risk transfer solutions that provide value on numerous levels. As an independent trade credit and political risk insurance brokerage, Securitas is focused on developing comprehensive solutions that meet the needs of clients, ensuring a complete understanding of policy wording and delivering excellent responsive service.